Quick Facts

Morocco continues to make notable progress in integrating its economy into the global marketplace. Procedures for conducting a business have become more streamlined, and foreign investment is generally welcome in many sectors. The country’s competitive banking sector continues to expand its regional presence. Subsidies on gasoline and industrial fuel have been removed since 2014.

Economic Freedom Snapshot

2016 Economic Freedom Score: 61.3 (up 1.2 points)

Economic Freedom Status: Moderately Free

Global Ranking: 85th

Regional Ranking: 9th in the Middle East/North Africa Region

Notable Successes: Open Markets, Business Freedom, and Monetary Freedom

Concerns: Corruption and Labor Freedom

Overall Score Change Since 2012: +1.1

Critical challenges confronting the kingdom include the lack of transparency, lingering corruption, and a very difficult regional environment. The judicial system remains susceptible to political influence, undermining ongoing anti-corruption efforts.

Background

Morocco, a constitutional monarchy with an elected parliament, has been a key U.S. ally in the struggle against Islamist terrorism. Constitutional amendments proposed by a commission authorized by King Mohammed VI and approved by referendum in 2011 were designed to increase the power and independence of the prime minister and provide greater civil liberties. Although the king retains significant power as chief executive, the current coalition government, led by the moderate Islamist Justice and Development Party, has taken bold steps to pursue macroeconomic stability and structural reforms. In addition to a large tourism industry and a growing manufacturing sector, a nascent aeronautics industry is attracting new foreign direct investment.

Despite the government’s rhetoric about combating it, corruption remains widespread both in public life and in the business world. The power of elected officials to shape policy is sharply constrained because the king and his advisers control most of the levers of power. The courts are inadequate and cannot be relied upon to rule quickly or fairly. Rates of land titling and land rights registration are low.

The top individual income tax rate is 38 percent, and the top corporate tax rate is 30 percent. Other taxes include a value-added tax and a gift tax. The overall tax burden equals 22.4 percent of GDP. Government spending is equivalent to 33.9 percent of total domestic output. The budget has been in deficit, and public debt now equals over 60 percent of GDP.

Procedures for setting up private enterprises have been further streamlined. Launching a business takes six procedures and 12 days, and no minimum capital is required. Labor market rigidity continues to discourage dynamic job growth. The government fully eliminated subsidies for all liquid petroleum products in 2015 but maintained subsidies for sugar, wheat, and cooking gas.

Morocco’s average tariff rate is 4.1 percent. With the exception of agricultural land, most sectors of the economy are open to foreign investment. Several state-owned enterprises distort the economy. The financial market, dominated by a competitive and growing banking sector, is fairly well developed in comparison to other economies in the region, and banking intermediation is gradually increasing.